US Dollar finds strength ahead of PCE data, rising yields

• The DXY Index showcases gains, jumping back above the 200-day SMA near 103.70.
• No relevant reports were released on Tuesday, focus is set on PCE and GDP data due later this week.
• Rising yields and markets delaying dovish bets on the Fed provide a boost to the Greenback.

The US Dollar (USD) index has been experiencing an uptrend, with the index currently trading up to the 103.70 level. This comes in anticipation surrounding upcoming key inflation data and the impact of rising yield as markets reduced their dovish bets on the Federal Reserve (Fed).

The US economy is maintaining its robustness as traders await key data and central bank meetings later this week. Despite a lack of major data or any Fed speakers, the market pushed back its easing expectations to roughly 125 bps over 2024, down from nearly 175 bps earlier this month, which has helped the Greenback recover. 

Daily Digest Market Movers: US Dollar gains momentum as rising yields drive uptrend amid lacking high-tier reports

• On Thursday, the US will release December Personal Consumption Expenditures (PCE) data, which is expected to show that inflation has stagnated. Gross Domestic Product (GDP) figures from Q4 are also due that day and markets expect the economic activity to have cooled off.
• US bond yields are on the rise, with the 2-year yield at 4.40%, the 5-year yield at 4.06%, and the 10-year yield at 4.15%. All three rates are approaching their highest level in January as investors adjust their expectations on the next Fed decision. 
• Projections from the CME FedWatch Tool show that the market's expectations for the start of the easing cycle have shifted to May.

Technical Analysis: DXY index recovers the 200-day SMA as bulls find a lift

The indicators on the daily chart reflect a mix of bullish and bearish sentiments. The Relative Strength Index (RSI) is in positive territory, indicating sustained buying pressure in the market that is underscored by the appreciating slope of the RSI plot.

Simultaneously, the Moving Average Convergence Divergence (MACD) paints a contrasting picture. The MACD histogram displays flat green bars, sporting a lack of bullish conviction. This stagnation of MACD hints at a balance in buying and selling pressures for the moment.

As for the Simple Moving Averages (SMAs), the DXY is trading above the 20-day SMA, indicating that the bulls maintain control in the immediate term. Nevertheless, the bearish undercurrent is evident with the index trading below the 100-day SMA. Yet the medium to long-term optimism remains as the index has recovered the crucial 200-day SMA.

Support levels: 103.50 (200-day SMA), 103.30, 103.00.
Resistance levels: 103.80, 104.00, 104.10.